The Association of British Insurers has been accused of making misleading claims about the scope of Flood Re, the proposed government-backed flood insurance scheme
The British Property Federation, which represents real estate owners and investors, this week warned that Flood Re would leave more than five million homes and four million small businesses without affordable cover and accused the ABI of not being open about its limitations.
It argued that, because the majority of leasehold properties require insurance to be bought on a block basis and because building insurance is considered to be a commercial deal, flats and businesses would not be covered by Flood Re.
Ian Fletcher, policy director at the BPF, said: 'It is misleading to suggest that the majority of the leasehold sector will be able to get buildings cover through the current arrangements for Flood Re,' adding that the ABI had not taken into account how leasehold works.
'People who live in leasehold properties will be able to insure their contents, but that will be cold comfort to them if they cannot afford to repair the structure of their home, replace their kitchen or mend their pipes and electricity cables,' he said.
'The vast majority of flats are leasehold and insured on a block basis to ensure that there are no gaps in cover. This is a necessity for all leases, whether in a block of four flats or 400 flats.'
The BPF wants the government and the insurance industry to re-think this issue when the Water Bill is debated on Monday.
But ABI spokesman Stephen Sobey said: 'Flood Re will cover up to 500,000 domestic properties at risk of flooding, regardless of whether leasehold or freehold, as long as they are insured by individuals rather than companies.
'Homes built after 2009 were not covered by the previous flood insurance agreement so this is not a new exclusion. We are not aware of any evidence that commercial property owners, including commercial landlords or managing agents, face significant problems in accessing flood insurance. In both cases flood insurance can usually be obtained through a broker.
'The government agree that it would be unfair for domestic customers to have to cross subsidise commercial risks, which is why Flood Re is focused on where the issue of flood insurance affordability and availability is most acute.'